The Uniform Franchise Offering Circular: What Every Franchisee Needs to Know
The Uniform Franchise Offering Circular: What Every Franchisee Needs to Know
What? You’re probably asking.
Just when you thought you had done all the heavy reading the law should allow, you’re faced with still more. Unlike your own research, however, this document the law actually requires. What exactly is a Uniform Offering Circular Agreement, or, as it is more commonly called, a UFOC? As you will come to see, it is not only an extremely important document for any franchisee, but it is also a vital layer of business protection that makes franchising one of the lowest-risk entrepreneurial ventures.
Entrepreneur.com defines a UFOC as “[a] regulatory document describing a franchise opportunity that prospective franchisees have to receive before they pay any money, sign any papers or, in some cases, even meet with the franchisor.” The document gives background franchise business information in over 20 categories regarding the selected franchise opportunity and provides a copy of the franchise agreement.
Although hardly a household word, the UFOC has been in existence for well over 25 years but traces its impetus back even further. During the 1960s and1970s, the franchise industry found itself beset with certain unethical behaviors that were adversely affecting those involved in the industry. In 1975, the Midwest Securities Commissioners Association presented the first UFOC. According to Entrepreneur.com, this first edition “was created in response to the disparate disclosure requirements that an increasing number of states were adopting in the early 1970s.” Eventually, all state and federal regulatory authorities adopted the UFOC. In 1979, the Federal Trade Commission (FTC) adopted the UFOC, and since that year, federal franchise law has required that franchisors provide the UFOC to prospective franchisees at least 10 days prior to the signing of the Franchise Agreement.
Specifically, the UFOC discloses franchise information in 23 different categories. This information must be current based on the franchisor’s most recent fiscal year, and if any changes have occurred since that time, the franchisor must make the information regarding these changes available to the potential franchisee in the form of a quarterly revision.
The 23 categories of the UFOC are as follows:
1. The Franchisor, Its Predecessors and Affiliates
2. Business Experience
3. Litigation
4. Bankruptcy
5. Initial Franchise Fee
6. Other Fees
7. Initial Investment
8. Restrictions on Sources of Products and Services
9. Franchisee’s Obligations
10. Financing
11. Franchisor’s Obligations
12. Territory
13. Trademarks
14. Patents, Copyrights, and Proprietary Information
15. Obligation to Participate in the Actual Operation of the Franchise Business
16. Restrictions on What the Franchisee May Sell
17. Renewal, Termination, Transfer, and Dispute Resolution
18. Public Figures
19. Earnings Claims
20. List of Franchise Outlets
21. Financial Statements
22. Contracts
23. Receipt
While covering numerous specific details, these 23 categories fall into several major areas, including history, fees and royalties, organizational management, any major legal issues or cases, franchise terms, and financial disclosure.
The history section will briefly chronicle the founding of the franchise and should include information regarding who started the franchise, any date of incorporation, and how long the company has been franchising.
Under fees and royalties should be listed in detail the initial franchise fee as well as ongoing royalty requirements. The franchisee should note, however, that the franchise fee might not include additional start-up costs such as facility rent, inventory, and equipment.
The organizational management section will provide information regarding the executive team of the franchise. According to Entrepreneur.com, this data should allow the franchisee to obtain an idea of the professional experience of the franchise’s officers and directors as well as discover if any potential conflicts of interest exist between these individuals and the suppliers and/or vendors with whom the franchisee will be doing business.
The UFOC’s legal information categories will inform the franchisee of any major civil, criminal or bankruptcy cases in which the franchise or any of its executive officers have been involved. Entrepreneur.com notes that in today’s litigious society, the presence of past legal involvements may necessarily signal a problem, but, depending upon the nature of the litigations, they may provide good cause for further investigation by the franchisee before entering into a contract.
The franchise terms detail a wide array of vital information, including contract renewal stipulations, franchisor and franchisee obligations, territorial considerations, and dispute resolution. Franchise terms may vary widely from one franchise opportunity to another, and it is crucial that the prospective franchisee thoroughly understand and accept the terms of the franchise prior to signing a contract. It is also strongly recommended that the franchisee also have his or her attorney review the UFOC and franchise contract.
The franchisor is also required to provide financial disclosure, including financial, balance, and income statements. Some franchisors may also make available profit and earnings forecasts, although these are not always required.
Although the Uniform Franchise Offering Circular may present itself as an intimidating document, in reality it is a crucial piece of franchise business information that not only protects but also helps franchisees as they take the exciting step of starting and owning a successful franchise business.
The Uniform Franchise Offering Circular What Every Franchisee Needs to Know - To learn more about this author, visit Candice Clem's Website.
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After months of careful thought and planning, you are poised to start your own franchise business. You’ve pinpointed your interests, narrowed your industry options, and selected the company that is your perfect match. Now, just weeks away from your own “opening day,” you find yourself handed a document of intimidating size with an equally intimidating title: Uniform Franchise Offering Circular.
What? You’re probably asking.
Just when you thought you had done all the heavy reading the law should allow, you’re faced with still more. Unlike your own research, however, this document the law actually requires. What exactly is a Uniform Offering Circular Agreement, or, as it is more commonly called, a UFOC? As you will come to see, it is not only an extremely important document for any franchisee, but it is also a vital layer of business protection that makes franchising one of the lowest-risk entrepreneurial ventures.
Entrepreneur.com defines a UFOC as “[a] regulatory document describing a franchise opportunity that prospective franchisees have to receive before they pay any money, sign any papers or, in some cases, even meet with the franchisor.” The document gives background franchise business information in over 20 categories regarding the selected franchise opportunity and provides a copy of the franchise agreement.
Although hardly a household word, the UFOC has been in existence for well over 25 years but traces its impetus back even further. During the 1960s and1970s, the franchise industry found itself beset with certain unethical behaviors that were adversely affecting those involved in the industry. In 1975, the Midwest Securities Commissioners Association presented the first UFOC. According to Entrepreneur.com, this first edition “was created in response to the disparate disclosure requirements that an increasing number of states were adopting in the early 1970s.” Eventually, all state and federal regulatory authorities adopted the UFOC. In 1979, the Federal Trade Commission (FTC) adopted the UFOC, and since that year, federal franchise law has required that franchisors provide the UFOC to prospective franchisees at least 10 days prior to the signing of the Franchise Agreement.
Specifically, the UFOC discloses franchise information in 23 different categories. This information must be current based on the franchisor’s most recent fiscal year, and if any changes have occurred since that time, the franchisor must make the information regarding these changes available to the potential franchisee in the form of a quarterly revision.
The 23 categories of the UFOC are as follows:
1. The Franchisor, Its Predecessors and Affiliates
2. Business Experience
3. Litigation
4. Bankruptcy
5. Initial Franchise Fee
6. Other Fees
7. Initial Investment
8. Restrictions on Sources of Products and Services
9. Franchisee’s Obligations
10. Financing
11. Franchisor’s Obligations
12. Territory
13. Trademarks
14. Patents, Copyrights, and Proprietary Information
15. Obligation to Participate in the Actual Operation of the Franchise Business
16. Restrictions on What the Franchisee May Sell
17. Renewal, Termination, Transfer, and Dispute Resolution
18. Public Figures
19. Earnings Claims
20. List of Franchise Outlets
21. Financial Statements
22. Contracts
23. Receipt
While covering numerous specific details, these 23 categories fall into several major areas, including history, fees and royalties, organizational management, any major legal issues or cases, franchise terms, and financial disclosure.
The history section will briefly chronicle the founding of the franchise and should include information regarding who started the franchise, any date of incorporation, and how long the company has been franchising.
Under fees and royalties should be listed in detail the initial franchise fee as well as ongoing royalty requirements. The franchisee should note, however, that the franchise fee might not include additional start-up costs such as facility rent, inventory, and equipment.
The organizational management section will provide information regarding the executive team of the franchise. According to Entrepreneur.com, this data should allow the franchisee to obtain an idea of the professional experience of the franchise’s officers and directors as well as discover if any potential conflicts of interest exist between these individuals and the suppliers and/or vendors with whom the franchisee will be doing business.
The UFOC’s legal information categories will inform the franchisee of any major civil, criminal or bankruptcy cases in which the franchise or any of its executive officers have been involved. Entrepreneur.com notes that in today’s litigious society, the presence of past legal involvements may necessarily signal a problem, but, depending upon the nature of the litigations, they may provide good cause for further investigation by the franchisee before entering into a contract.
The franchise terms detail a wide array of vital information, including contract renewal stipulations, franchisor and franchisee obligations, territorial considerations, and dispute resolution. Franchise terms may vary widely from one franchise opportunity to another, and it is crucial that the prospective franchisee thoroughly understand and accept the terms of the franchise prior to signing a contract. It is also strongly recommended that the franchisee also have his or her attorney review the UFOC and franchise contract.
The franchisor is also required to provide financial disclosure, including financial, balance, and income statements. Some franchisors may also make available profit and earnings forecasts, although these are not always required.
Although the Uniform Franchise Offering Circular may present itself as an intimidating document, in reality it is a crucial piece of franchise business information that not only protects but also helps franchisees as they take the exciting step of starting and owning a successful franchise business.
The Uniform Franchise Offering Circular What Every Franchisee Needs to Know - To learn more about this author, visit Candice Clem's Website.
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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John AlexanderJohn has taught keyword research and SEO skills to small groups of business owners and Webmasters from over 80 different countries world wide since 2002. John is also the Director of Search Engine Academy ; Co-director of Training at Search Engine Workshops offering live, SEO Workshops with his partner SEO educator Robin Nobles, author of the very first comprehensive online search engine marketing courses at SEO Training Online and the SEO Workshop Resource Center. I look forward to hearing from you! - Visit John Alexander's Website |
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Cheryl MatthynssensCheryl is a life skills coach, licensed Chemical Dependency Counselor and a 20 year entrepreneur. Cheryl's dedication to achieving a life of balance led to her expanding her teaching from the simple managing of life's daily challenges to adding financial well being as well. A direct marketer with DrinkACT, she is gaining ground in the online community with her concepts of making sure business owners, entreprenuers and employees have well rounded life styles. She opened up a small affiliate site - The Balance Guide- to help others find resources for mental and emotional well being. Visit Cheryl's blog to see more of the diversity beyond business she has began offering online at www.thebalanceguide.blogspot.com - Visit Cheryl Matthynssens's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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